Parts Explained for Non-parts Management – Part 2

This is Part 2 in a two-part article. Continued from last week (Part 1).

Lost Sales

This is a tool to log demand for a part that you do not have on hand when a customer needs it. It serves the same value as Traffic Control in Sales, helping the store to develop an inventory that matches customer needs. This is one of the most underutilized tools I see in almost every dealership I visit for the first time. Every person who sells parts has at least two opportunities or more daily to post a Lost Sale, especially if they are selling to Wholesale customers.

Reconciliation

This is the monthly exercise of matching the value of the Physical Inventory (PAD) to the General Ledger (GL.) This is no different than Floorplan Checks and I’m constantly amazed at how many stores do not perform this basic check and balance. Adjustments are made to the PAD to account for Work In Process, which is equivalent to Contracts In Transit, Returns and Credits Pending; Cores which are not in the PAD but are in the GL; and Appreciation and Depreciation, since the manufacturers change some prices every month, and as soon as the update is run the PAD value changes, but not the GL, unless you report it and make the appropriate adjustments.

Daily Perpetual Inventory (DPI)

This is the procedure that counts all of the Investment 3 or 4 times annually, but on a daily basis just like your Lot Counts. It is designed to achieve 2 objectives:

  • Ensure that parts are where they are supposed to be, making your parts people more efficient.
  • Provide accuracy in the PAD so the Reconciliation is accurate. As a side benefit, if you do this properly, you can probably avoid the Annual Physical Inventory or at least be prepared for it at any time.

Personnel

Just like in Variable Operations you have to have enough people in place at any time to process the current business demands, as well as develop growth for the dealership. All too often we simply count heads without taking into account the portion of their time that they are available to perform their duties.

Calendar Utilization

This term refers to days that a staff member is on hand during a work year. Elements that figure into it are:

  • Vacation Days – how many working days are missed due to earned vacation days? This becomes a real issue when a store has a lot of senior employees who have earned multiple weeks off. It also begs the question of the dealership policy relating to whether employees can forgo the time off in return for compensation, or if they are required to take the time off or lose it.
  • Sick Days – Much like vacation days a ‘Use it or lose it’ policy can have ramifications on employee attendance.
  • Personal Days – A lot of stores will allow, or in some states are required to provide for, days off for things like birthdays, anniversaries, death-in-the-family, and the like. These also come out of the annual total.
  • Training – Whether the training is in-house or away at school, it still amounts to time away from their position. Do you allow for this in your determination of total staff?

Hours in a Day

What constitutes a day in your store? Most dealerships are open 10 to 12 hours in Fixed Operations, some even longer. Things to take into consideration for coverage are:

  • 6- or 7-Day Weeks – 6 days are almost mandatory now and we are starting to see 7 days becoming more common in some markets. Scheduling starts to become a serious issue now.
  • Extended or Multiple Shifts – Service Operations are often working four 10-Hour Shifts and some are even doing three 12’s. Parts have to be open to serve their needs, too.
  • New Overtime Laws – The new Federal OT laws, in addition to already existing ones in some states, may well require additional staff to provide cost effective coverage.

There are a lot of details involved in managing a profitable Parts Operations beyond just selling parts and controlling Gross profits, and I hope this has raised some questions in the minds of Dealer Executives as to what else they need to be aware of. There are many solutions and one size never fits all.
Written by Jim Richter

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